International trade is integral to Central South, but how are businesses responding to pressures?

As a region with a proud pedigree in international trade, Central South businesses have undoubtedly felt the strain when it comes to supply chain management. In a period of relentless challenges, which kicked off with Brexit, before a global pandemic, geo-political unrest, and economic uncertainty compounded issues, the operation of importing and exporting goods has become difficult, to say the least.

It's unsurprising that an overwhelming 96% of Central South businesses admit that disruptions in their supply chain are having a direct impact on their business. In fact, according to our bi-monthly Rethinking the Economy survey of 500 mid-sized businesses, supply chain challenges, such as shortages, cost increases and delayed materials, will be the biggest challenge facing regional businesses over the next six months. When you consider that it’s in the company of rising business costs and inflation, workforce challenges, including labour shortages, skills gaps and recruitment, then you begin to understand the magnitude of the task that exists both now and in the future.

However, this is a familiar problem. For many months, the issue of supply chain management has featured prominently in our Rethinking the Economy survey, particularly for a region such as Central South which has such strong connections with overseas markets. The familiarity has bred innovation and wider thinking; it has forced businesses to be creative in how they deal with the problem; it has led many to invest in solutions to solve the pressures bearing down on the supply chain.

One of the main drivers is a desire to reduce the impact of political and commercial uncertainty in the UK on businesses, such as increasing corporation tax levels and changing innovation incentives. What’s more, Central South businesses are keen to forge relationships with new suppliers as a way of accessing better incentives and benefits, as well as looking at routes to more competitive markets with a lower cost base.

Motivations aside, the tactics to achieve those aims are particularly interesting. According to our Rethinking the Economy survey, more than a third are looking to use technology as an enabler to create efficiencies and ongoing optimisation of supply chain processes, with 39% planning to embrace regionalisation and localisation given the disruption in the supply chain. But it’s the onshoring versus offshoring debate that appears to be gaining considerable traction. In fact, 37% of companies in the region intend to offshore as much of their operations as possible in a bid to contend with ongoing challenges. Deciding on whether to bring everything onto home soil, or move operations overseas is hugely important and one that carries both pros and cons. So where do you start?
 

Offshoring your supply chain

There are number of questions you need to consider before embarking on a potential offshoring journey. These include:

  • Assessing your current supply chain procedures. Can you avoid the need to offshore by streamlining your UK processes?
  • Is there a balance to be struck? Does a blend of UK and offshore operations give you the best of both worlds?
  • Ensure you fully consider the complexities of undertaking offshored operations
  • Look at whether there are any tax saving opportunities that could increase your profitability.
     

With 80% of Central South businesses admitting that they are currently facing disruptions in their supply chain, there is a real need to act, and act now. Finding the right answer that suits the individual needs of each business is the difficult part. Ultimately, the key to an effective supply chain can often lie in high quality data, excellent planning, robust SLAs with key partners, full accountability, and clear oversight and management. If you would like to discuss the blog, or the value of a supply chain/value chain health check, email me via chris.williams@bdo.co.uk.